The world's largest futures exchange plans to launch "Bitcoin trading"! Coinbase plummeted 9% on the news

According to the Zhitong Finance and Economics APP, as of the close of the U.S. stock market on Thursday, the cryptocurrency exchange Coinbase (COIN.US) plummeted by over 9% to $199.170, breaking below the $200 mark. Earlier on Thursday, media reports indicated that due to strong interest from institutional clients, the Chicago Mercantile Exchange (CME), the world's largest futures exchange, may soon offer a bitcoin spot trading path to its clients.

Cryptocurrency prices, on the other hand, generally rose that day. Tracking the CoinDesk 20 Index, which includes the 20 largest digital tokens by market capitalization including Bitcoin, it rose by 0.91% in the past 24 hours. The price of Bitcoin has risen by over 4% in the past week, continuing to benefit from the better-than-expected U.S. inflation report released on Wednesday. Since the beginning of this year, as cryptocurrency prices have generally risen, Coinbase's stock price has increased by nearly 20% year-to-date, with a single-quarter increase of over 50% in the first quarter, but the stock price experienced a significant pullback in the early second quarter due to fading expectations of a Fed rate cut.

The Chicago Mercantile Exchange (CME), headquartered in Chicago, has a history of over a century and is an empire in the futures trading market, being the world's largest futures exchange and financial market.

From its inception to the present, Coinbase has been profitable due to its position as the most trusted cryptocurrency exchange in the United States, but if the CME officially joins in, this advantage may be completely changed. Investors are beginning to worry that once a traditional financial giant of the size of the CME opens up a pathway for Bitcoin trading, cryptocurrency exchanges like Coinbase may face a very challenging competitive situation, and various advantages of exchanges like Coinbase may be overshadowed by the CME.

The CME has been designated by U.S. regulatory agencies as a "systemically important financial market utility," which means it will be subject to a more stringent regulatory framework by the U.S. government, but it also means more secure investor protection guidelines. The title of "systemically important" often means that the government will never allow the Chicago Mercantile Exchange to collapse in any financial crisis, and its importance can rival that of Wall Street banking giants like J.P. Morgan and Bank of America.

It is reported that Bitcoin futures contracts have been traded on the CME for a long time. By open interest, the Chicago Mercantile Exchange is already the largest Bitcoin futures exchange in the United States.

Institutional investors' interest in cryptocurrency investments is on the rise

According to reports, the exchange has stated that it has been holding meetings with traders who wish to trade Bitcoin on regulated trading markets. Unlike Coinbase, which primarily serves retail investors in the cryptocurrency market, if the CME successfully launches a Bitcoin spot trading path, institutional participants may play a significant role. Analysts have pointed out that a common reason why traders at Wall Street financial institutions are generally reluctant to engage with digital assets is due to a lack of high trust in cryptocurrency exchanges, especially after a series of credit defaults involving participants from well-known cryptocurrency exchanges have been exposed in recent years. This includes the bankruptcy declaration of FTX, a crypto trading institution that was once very popular in the cryptocurrency market, due to a debt hole exceeding billions of dollars.

It is understood that the recent introduction of Bitcoin spot exchange-traded funds (Bitcoin ETFs) not only allows retail investors to participate, but also attracts a large number of investment institutions from around the world. ETFs can be seen as providing a safer way for investing in cryptocurrencies. This also indirectly reflects the enthusiasm of institutional investors towards Bitcoin, with more concerns possibly arising from the aspect of trading security. In just the first three months, over 500 institutions participated in trading Bitcoin ETFs, with over $10 billion allocated in these issued ETF funds. The remaining over $40 billion came from retail investors.

Among the institutional participants, hedge fund Millennium Management is particularly noteworthy, holding at least four Bitcoin ETFs with a total value of around $2 billion. Additionally, Steven Cohen's Point72 Asset Management and Elliott Management Corporation are also active participants in this field. Other investment entities include the Wisconsin Investment Board, Montreal Bank, as well as companies from Hong Kong, the Cayman Islands, Puerto Rico, Switzerland, and other regions.

Investment banking giant Morgan Stanley is also a significant holder of Bitcoin ETFs. According to data from market insights company Fintel, Morgan Stanley purchased $269.8 million worth of 4.27 million shares of Grayscale Bitcoin Trust (GBTC) on May 15th. This investment move indicates that Wall Street financial giants are incorporating the world's largest cryptocurrency, Bitcoin, into their investment portfolios.

Stephane Ouellette, CEO of FRNT Financial, pointed out that the growth of Bitcoin ETFs cannot solely be attributed to retail investors' purchases, as portfolio managers on Wall Street, major institutional investors, and investment banks have started to venture into this field